slide fsm economic review jemco-jemfac, august 2013 graduate school usa, pacific & virgin...

slide

FSM Economic ReviewJEMCO-JEMFAC, August 2013

Graduate School USA, Pacific & Virgin Islands Training Initiatives

1

slideGraduate School USAPacific Islands Training Initiativewww.econmap.org

FSM Presentation

Economic Performance

Economic Policy

Compact Trust Fund

2


REAL GDP & Per Capita GDP

3

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$200

$210

$220

$230

$240

$250

$260

$2,000

$2,100

$2,200

$2,300

$2,400

$2,500

$2,600

247.7 247.4

2,334

2,383

GDP at constant prices GDP per Capita

GD

P U

S$

Mill

ion

s

GD

P (

Pe

r C

ap

ita

)

-0.1% GDP Growth from FY03 to FY12

0.2% GDP Per Capita Growth


REAL GDP per Capita by State

Chuuk

Kosrae

Pohnpei

Yap

4

19811983

19851987

19891991

19931995

19971999

20012003

20052007

20092011

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Chuuk Kosrae Pohnpei Yap


-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

GDP per capita growthFY03-FY12

Net Migration 2003-12

Chuuk Kosrae Pohnpei Yap FSM

GDP and Migration

-7,082-1,015

-5,334-1,766 -15,197

-1.8% ANNUALLY

5


Average Wage Rates

6

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

Private Sector Public Sector

2.9% Average Private Wage Growth During Amended Compact Period

2.1% Average Public Wage Growth During Amended Compact Period


Employment by Sector

7

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Private Sector Public Sector

0% Private Employment Growth During Amended Compact Period

-1.4% Public Employment Growth During Amended Compact Period


Revenues vs Expenditures

8

FY04FY05

FY06FY07

FY08FY09

FY10FY11

FY12$120

$130

$140

$150

$160

$170

$180

$190

$200

$210

$220

Revenues Expenditures

US

$ M

illio

ns


External Debt & Service

9

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY20120%

5%

10%

15%

20%

25%

30%

35%

External Debt, % of GDP Debt Service, % of National Gov. Domestic Revenues


Growth Scenarios (Real GDP Per Capita)

10

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$2,050

$2,150

$2,250

$2,350

$2,450

$2,550

$2,650

$2,750

$2,850

Sustained Scenario Dismal Scenario Actual


FSM Policy Issues

Public Sector Wages

Tax Reform

Long-Term Fiscal Framework

Compact Trust Fund

11


FSM Policy Issues

PUBLIC SECTOR WAGESTotal wage bill had been rising unsustainably from FY2004 to ~FY2010

Wage bill discipline has varied across five governments but now stabilized

Wage bill “freeze” alone had not proven to be effective—broader policy discipline has been required

12


Public Sector Wages

13

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

$40

$45

$50

$55

$60

$65

$70

4,000

4,500

5,000

5,500

6,000

6,500

7,000

Wage Cost Public Servants

Wa

ge

Bill

$M

illio

ns

Nu

mb

ers

of

Pu

blic

Se

rva

nts

FSM


Public Sector Wages

14

$10

$11

$12

$13

$14

$15

$16

$17

$18

$19

$20

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

Wage Bill Public Servants

Wa

ge

Bill

$M

illio

ns

Nu

mb

ers

of

Pu

blic

Se

rva

nts

Chuuk


Public Sector Wages

15

$4.0

$4.2

$4.4

$4.6

$4.8

$5.0

$5.2

$5.4

$5.6

$5.8

$6.0

500

550

600

650

700

750


Wa

ge

Bill

$M

illio

ns

Nu

mb

ers

of

Pub

lic S

erv

an

ts

Kosrae


Public Sector Wages

16

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

$12

$13

$14

$15

$16

$17

$18

1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500


Wa

ge

Bill

$M

illio

ns

Nu

mb

er

of

Pu

blic

Se

rva

nts

Pohn-pei


Public Sector Wages

17

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

$4

$5

$6

$7

$8

$9

$10

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500


Wa

ge

Bill

$M

illio

ns

Nu

mb

er

of

Pu

blic

Se

rva

nts

YAP


Public Sector Wages

18

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

$5

$6

$7

$8

$9

$10

$11

$12

$13

$14

$15

250

300

350

400

450

500

550

600

650

700

750


Wa

ge

Bill

$M

illio

ns

Nu

mb

er

of

Pu

blic

Se

rva

nts

National


FSM Policy Issues

TAX REFORMStatus Update: Recent progress suggests tax reform will be effective within the next ___ years

Tax reform is an important component of long-term fiscal management

Worst-case scenarios considered through the LTFF process would be mitigated in the presence of enhanced revenue efforts

20


Impact of Tax Reform

Real Reduction vs Tax Reform Revenue

FY13 to FY23:(A) REAL

Reduction(B) Tax Reform

Revenue (B) as % of (A)

National -$1.1 $1.9 166%

Chuuk -$4.4 $1.7 39%

Kosrae -$1.3 $0.5 40%

Pohnpei -$2.9 $5.5 189%

Yap -$1.8 $2.2 121%

FSM -$11.5 $11.8 103%

21


Impact of Tax Reform

Legislative Status of FSM Tax Reform

URA RAA MOU NPT Import

VAT rateGRT

Repeal VAT

National P P P R R R

Chuuk P P P

Kosrae P P P

Pohnpei R P R

Yap R P R

Passed Required Not Required

22


FSM Policy Issues LONG-TERM FISCAL FRAMEWORK: STATES

Exercise completed in each of the four states

Results incorporated into FY14 budgets

LTFF was designed to address decrement issue with known resources (vs uncertain policy reform efforts) through expenditure reductions

Dilution vs Strategic Consolidation (was LTFF effective?)Wage bill discipline still varied across five governments but improvingRaised awareness of the impact of the decrement over whole periodBroadly participatory; consensus-driven; priority-focused, but…Numerous technical difficulties

23


FSM Policy Issues LONG-TERM FISCAL FRAMEWORK: NATIONAL

National government faces a different fiscal picture: revenue buoyancy… though half of the $20 million annual increase since FY2006 is new enough to not be “settled” in national/FSM policy

National contribution to the FSM-wide LTFF will be most useful if it focuses on a gradual, long-term reallocation of resources & if it increases reserves for the benefit of each government

Sensible options include: 1. Saving for the future to reduce burden of adjustment—CTF2. Tax reform and modified revenue/grant formulas with the states (gradually)3. Investing (effectively) to reduce cost structure for state delivery of health and

education services4. Investing (effectively) in economic infrastructure to support private sector

growth

24


Domestic Revenue: National & States

25

FY04FY05

FY06FY07

FY08FY09

FY10FY11

FY120

5

10

15

20

25

30

35

40

45

50

$26.6

$27.1$27.3

$47.5

States National

US

$ M

illio

ns

74% Increase from 2006


FSM Compact Trust Fund

OBSERVATIONSManagement of the CTF further streamlined and improved; investment costs are admirably low and investment policy monitoring/updates reflect high standard of care

Annual report for FY2012 continues improvements, building on the FY2011 report

Looming need to focus on “distribution policy” per TF Agreement Article 15(1)

Projections on CTF “effectiveness” could be improved for clarity

25



31



34



35

slide fsm economic review jemco-jemfac, august 2013 graduate school usa, pacific & virgin...

Documents

pacific virgin islands

orgslide12public sector

orgslide13public sector

orgslide14public sector

orgslide15public sector

orgslide16public sector

orgslide17public sector

gdp growth